Aunty is on her way to Las Vegas tonight with Uncle (big 6-0 celebration with fellow Kaimuki Bulldogs, McKinley Tigers and Roosevelt Rough Riders).
I brought along a book for the plane ride, “Rocking Wall Street” by Gary Marks. The author is a very interesting man living a wonderful life doing what he wants, when he wants, and where he wants. I found his philosophy about life and wealth fascinating, and want to grow up to be like him.
Here are Aunty’s brief notes:
Gary was a successful professional rock songwriter who also traded stocks (day trading) and did very well. However, one day, he had a really great trading day and rushed in all excited to tell the great news to his wife, she told him that she would rather be married to an 80 year old Gary with $8000 in the bank vs a Gary who makes $8,000,000 in the stock market and dies in 8 years. He was either nervously happy or nervously upset each day. He stopped day trading immediately and put his money in hedge funds.
His definition of the End Game – no longer being concerned about money – is when you have enough principal invested safely for your after-tax income to match or exceed your annual expenses on an ongoing basis. [Aunty’s note: this is the same as Robert Kiyosaki’s definition of getting out of the Rat Race when playing his CashFlow Game – passive income exceeds expenses.]
This book is his journey to reach his End Game.
Gary was asked, “What would make you feel rich?” His response was to live where he loved to vacation, near a beach, in the sun, in a Spanish-style modest house and surf and play all year round. So, he moved to Maui and goes on vacation to visit friends on the mainland.
His advice to achieve : Choose only risk-averse investments for your portfolio, so you can spend less time and energy riding the waves of great wins and heavy losses.
Gary’s mantra is “Everything you know is wrong”, so it is important to have a strategy that bypasses risk and decision making. This is the psychology of hedging. Give up the big win to avoid the big fall. Diversify ideas, asset classes and strategies. Be clear on whether you are investing, or gambling [big AHA! moment for Aunty.]
Rather than love an asset and therefore invest in it, the better mindset is to believe in the success of the asset but also hedge the risks of the asset. Assess your portfolio of assets – no regrets, no love addictions. Rearrange it, synchronize it, diversify it.
The key to truly great investing is to always protect your principal first, and attempt to make a profit second.
Gary does not seem to believe in the long term benefits of holding real estate, citing that there were only 2 decades in the last 120 years when real estate outperformed stocks, and that was in the 1930s and 1970s. If one does invest in real estate, his 3 criteria for it are:
- Strong employment opportunities, and/or a vibrant university economy
- Increases in population, therefore increase in housing
- The area is a warm and wonderful place to retire.
He suggests diversification and dollar cost averaging (every year keep buying more of what you have) for those who are looking to grow their net worth within a whole lot of indexes such as the S&P 500, Wilshire 5000 index, International, Russell 2000, Nasdaq, REITs, TIPS.
For wealthier individuals, Gary promotes hedge funds and does not recommend doing it yourself.
The rest of the book was read through quite quickly and to tell the truth, Aunty wasn’t as interested in the back half of the book as the front half. One point that really stuck out was how he suggested buying a home to live in, and upgrading when one’s finances improved. This contrasted with Robert Kiyosaki and his infamous “your house is not an asset” revelation that was, and still is, very contrary to popular opinion.
I plan to pass this book along to pal Randall, a fellow craps playing Bulldog. Sometimes we discuss our options trading adventures and no matter how many times we are beaten, we get back into the losing game of thinking we know what the market will do.
If this book helps either of us shake the very bad habit of betting on the losers, then it is well worth reading and sharing.
We’ll save the gambling for the tables in Vegas. Aunty might actually have better odds at that than picking up, down, or sideways in the stock market.
